Would the jury see through it? Here he was in Chicago, Dan Fischel’s town, in front of a judge known well to Fischel’s lawyer, before a jury of stolid midwesterners. He could only fear the worst. To Lerach, it was all a reprise of Fischel’s inscrutable performance under his own questioning during the Nucorp trial. “Dan Fischel could look at a rainstorm and tell you how bright and sunny the day was and do it with a straight face,” Lerach told Mel Weiss, who was less than delighted to have already suffered a grilling of his own on the witness stand.
Now came Lerach’s turn in the witness box, his first challenge being to keep his rage and indignation in check as he faced the most humiliating experience of his legal career.
Mark Hansen, Salpeter’s aggressive law partner, asked the opening question: “You admit, do you not, Mr. Lerach, that you have in the past threatened to drive companies into bankruptcy in the course of your work?”
“Yes,” he admitted.
Not missing a beat, Hansen then asked: “Mr. Lerach, have you said publicly, sir, that you believe a class action lawyer on the plaintiffs’ side should have a certain element of ‘irrationality’ in his makeup?”
Lerach equivocated: “I don’t know if I said it publicly, but I think I’ve said it.”
Hansen asked him to define irrationality.
Lerach appeared to think about his answer before saying: “Unpredictability as to whether or not you will or will not go to trial or you will or will not do something else …”
“A tactic to induce fear in the people you sue?” Hansen asked, keeping up the attack.
“Lawyers representing clients are required to zealously advance their interests,” Lerach tried to explain. “You do that in a whole myriad of ways: factually, legally, dealing with your adversaries, and by the way, I mean lawyers on the other side. Litigation has a psychological aspect to it, Mr. Hansen.” He was being painted as a brute, a monster, he thought to himself. Hell, Charlie Keating was a brute. Joe Camel was a monster.
“Were you trying to induce fear in a man by the name of Al Shugart in the 1980s, Mr. Lerach?” Hansen asked.
Lerach could not contain a chuckle, recalling the one CEO he personally despised, the one who mounted a media campaign against him and whom he had sued numerous times.
“Is there something amusing in your memory with respect to Mr. Shugart?” Hansen wanted to know.
Of course there was. There was the business card he’d sent the Seagate chief, after he’d sued him and won millions, telling him he could expect more lawsuits. But Lerach couldn’t say that.
“It’s a serious matter, isn’t it, Mr. Lerach, to be sued for substantial damages?” Hansen asked.
Lerach, now a defendant, feigned amusement at the irony: “You telling me?”
Hansen, knowing he had Lerach on the ropes, moved back in. “Mr. Lerach, you wouldn’t say to me or to anybody in this courtroom that the prospect of being sued for millions of dollars is a laughing matter, would you?”
Lerach glanced at the plaintiffs’ table and thought he detected a tight smile emerging from Fischel. “It’s not a laughing matter,” he conceded.
After spending another twenty minutes reviewing Lerach’s legal pursuits against Shugart, Hansen asked Lerach to explain himself for having told a reporter, “I have the greatest practice in the world, I have no clients.” Before Lerach could formulate an answer, Hansen asked if he had been misquoted.
“I spoke the words, not in the context that they were published …,” Lerach tried to explain.
“Well, you spoke the words,” Hansen insisted. Lerach repeated his previous answer. Again, Hansen asked him if he’d been misquoted.
“I was not misquoted—I mean I said that in substance. I don’t know if every single word is right, but I said that in substance, but not in the context in which it was quoted.”
Hansen looked confused, but only for effect. Judging from the looks on the faces of the jurors, he had succeeded.
This whole trial was out of context, Lerach thought. Fischel should be answering for the wave of frauds sweeping through this economy. I should not be answering for a few curse words. Of course I wanted to put him out of business. The entire intellectually bankrupt University of Chicago “economic theory of law” should be exposed.
Suddenly, Hansen asked Lerach: “Do you have any hostility with a lawyer by the name of Stuart Kadison?”
Lerach blanched. “I wouldn’t say hostility.”
Turning to the jury, Hansen then repeated the infamous elevator incident during the Nucorp trial. “Well, how about this as an example. Did you follow him into an elevator one day and say: ‘This is going to be an ignominious end to your mediocre career’?”
Lerach straightened in his chair. “I don’t think I was quite that colorful.”
“Did you say that or did you not say that, Mr. Lerach?” snapped Hansen, pivoting back on the witness.
“I said something to him about if he lost the case it might be the end of his career,” Lerach replied.
“I’m asking you very specifically, very specific words. Did you say to Mr. Kadison: ‘I’m going to put an ignominious end to your mediocre career’?”
Solovy objected and was overruled.
“I don’t think I said those exact words,” Lerach said, barely audible.
“Did you refuse to shake Mr. Kadison’s hand at the conclusion of the trial?” Hansen then asked.
“Refuse? No.” Lerach answered.
“Did you shake his hand?” Hansen continued.
“That’s true, I did not,” Lerach conceded. (Earlier, Kadison had testified that in all his fifty years of practicing law, this had been the first time an opposing counsel had declined to shake hands.)
Elsewhere in the courtroom some lawyers took delight in witnessing Lerach’s flogging. Others at the firm, Mel Weiss foremost among them, sorely wished that they had been able to avoid this humiliation.
Hansen sustained his attack: “Mr. Lerach, were you angry when the jury came back for the defendants in Nucorp?”
Lerach glared at him. “No.”
“Was your face red?” the defense lawyer needled.
“I think my face is always red. Probably got a little redder,” Lerach answered.
“It got a little redder during your examination here?” Hansen asked, once again mocking Lerach before the jury.
“Look, I’m taking my blood pressure medicine,” Lerach mumbled. “I don’t know what I can tell you.”
Substantive questions followed. Lerach was compelled to admit that follow-up questions with jurors in the Nucorp trial indicated that they had been influenced by Fischel’s testimony.
Hansen then turned to the infamous memo Lerach had authored, construed by many who’d read it to be an attack on jurors. “Mr. Lerach, I’m asking you if someone’s sense of class is the most—single most important factor—in deciding a person’s attitude toward a case?” Hansen insisted.
Lerach started to explain haltingly: “It says, in other words, and then explains, I thought that—”
Hansen interrupted: “Mr. Lerach, can you answer my question, sir? Do you think class determines people’s reaction to cases?”
Lerach stammered: “I thought it was as I said there, an important factor, single most important factor.”
Reading from an exhibit, Hansen continued: “Second, you write: ‘In other words, conservative, sixty-year-old Republicans are probably so devoted to the system and so wedded to the idea that each person is responsible for what happens to him in his own life that this bias cannot be overcome even though there may be other factors which they have in common with the claimants in a given case, i.e., they are savers and investors.’” Hansen put down the exhibit. “Was that your considered view?”
Lerach answered that it was extrapolated from interviewing jurors.
“Mr. Lerach, are you telling us you’re simply parroting what a juror told you? Did a juror tell you that?” And he repeated what he’d just read and
asked again: “Was that something a juror told you?”
“Absolutely not,” Lerach replied. “This is a conclusion I reached processing and synthesizing the juror interviews that I had done. So that was a conclusion I reached based on that.”
Hansen was satisfied with the path his questions had provided for the jury. But he had one more line of questioning: “Mr. Lerach, isn’t it true you were just upset about losing the case, and therefore, you were lashing out at people who you thought had ruled against you?”
Lerach answered “No,” but by that time jurors were beginning to find his answers defensive and predictable. And as Hansen continued to hammer at Lerach’s state of mind following the stinging Nucorp defeat, it became apparent to all in the room that no matter how the subsequent answers were parsed, the same anger Bill Lerach had directed at jurors who had ruled against him was also aimed at Daniel Fischel, the expert witness who had turned those jurors in favor of the Nucorp defendants.
The next day the battering continued. And this time the defendant and his firm would be embarrassed financially. The discovery process that lawyers for Milberg Weiss, Lerach in particular, had used so ruthlessly and effectively in forcing corporate defendants to settle rather than risk public exposure was now being turned against them.
“Didn’t you tell Buzz magazine, Mr. Lerach, quote: ‘I make a shit load of money’?” Lerach denied making the comment, although Hansen quickly established that the comment had been made, not to Buzz magazine but to Upside magazine. Fischel’s lawyer was laying a foundation for asking Lerach about his personal income and the income of Milberg Weiss, information that Mel Weiss had always jealously guarded. Prompted by a chart Hansen had erected near him, Lerach conceded that his pretax income for 1988, the year of the Nucorp case, was $2.3 million. Was he worried that his share would diminish if he kept losing cases? Lerach refuted this inference, saying that the following year he earned around $6.5 million.
“Now,” Hansen continued, “the firm profit was approximately thirty-five million, four-hundred-sixty-nine thousand, three-hundred-ninety-nine dollars?” Lerach confirmed the number. Looking on, Mel Weiss was seething.
Following the numbers on the exhibit, which Lerach thought looked eerily similar to the charts he himself often used as evidence, Hansen covered a timeline from 1990 through 1997, showing the firm profit rising to $46 million and Lerach’s share rising by 33 percent to $9,399,630 in 1992. Jumping to 1993, the chart showed Lerach earning $13,647,630, with his 1994 pretax income rising to $16,070,091 the following year, nearly matching that of Mel Weiss; the firm’s profits exceeded $100 million.
“So, over this period after 1990 when the racketeering lawsuit [against Fischel] was tendered to the court, you increased your percentage ownership in the Milberg firm to the point where you reached the same level as Mr. Weiss, correct?”
There was no denying the numbers on the charts. They had come from Milberg Weiss’s own financials, which the firm had been compelled by court order to furnish the plaintiffs. Still, trying a whole case over the disparity of relative incomes was tenuous, Lerach thought. But Hansen and Salpeter were about to take other avenues.
“Do you recall prior to March 26, 1990, Mr. Lerach, whether anybody from your law firm prepared a memorandum evaluating whether there was a valid basis for pursuing a racketeering lawsuit or any other kind of lawsuit against Lexecon or Dan Fischel?” Hansen asked.
Lerach hesitated before answering: “We prepared a fifth amended complaint. I think that is responsive.”
Hansen moved to strike the answer. “Can you answer my question, Mr. Lerach?”
Again Lerach hesitated, couching his answer: “Is there a freestanding memo …?”
“Mr. Lerach!” Hansen cut him off.
“Repeat the question then,” Lerach requested.
This drew Hansen’s ire: “If you don’t understand my question, please tell me. Please don’t rephrase my question. I understand you’re a trial lawyer, sir. I understand that you’re used to doing the questioning. I would appreciate if you would simply answer my question or tell me you don’t understand it.”
Solovy intervened, objecting to Hansen’s badgering. The judge sustained but admonished the witness: “Mr. Lerach, one of the problems when you are a lawyer and you get on the witness stand is you think like a lawyer, not like a witness. Mr. Solovy is a very fine lawyer. He will do the lawyering. You do the witnessing.”
Lerach asked for the question to be repeated, knowing full well what Hansen was attempting to compel him to disclose. Was there a single memorandum evaluating a basis for suing Fischel?
“No single memorandum,” said the witness.
Already knowing the answer, Hansen then asked: “Can you point us to any handwritten notes taken by you or any of your attorneys prior to March 26, 1990, analyzing the basis for your claim against Dan Fischel or Lexecon?”
Lerach appeared to probe his own memory, finally saying: “There were such notes, no doubt, but I do not believe they exist any longer.”
“You can’t show these notes to the jury, can you?” Hansen said, barely able to contain his relish.
“Of course not,” Lerach fairly snapped. “They’re gone.”
Sensing he was firmly perched on high ground, Hansen asked for and was granted a lunch break. When they resumed, Hansen asked Lerach if he or his attorneys had talked to any federal regulators whom the plaintiffs’ lawyers alleged had been defrauded by Fischel and Lexecon through reports they wrote that were favorable to Lincoln and Charles Keating. Lerach admitted none had been interviewed.
Hansen then produced an analysis of Lincoln’s operations and the financial performance report that Lexecon had prepared for Lincoln that was submitted to the Federal Home Loan Bank Board.
“My question, Mr. Lerach, is did you—before filing your racketeering lawsuit on March 26, 1990—determine what individuals, what human beings had written this report?”
Lerach answered haltingly: “The people at Lexecon, the human beings that worked at Lexecon had clearly written the report, unless it was forged by someone else.”
“Which human beings at Lexecon, Mr. Lerach?”
“Certainly, Mr. Fischel,” the witness replied.
“Mr. Lerach, show us where in that report there is any indication that Mr. Fischel wrote that report.”
Lerach didn’t waste time; he knew what he must say: “His name is not on the report. It’s just submitted by Lexecon Inc.”
Later Hansen would put his attack into context, asking Lerach: “Have you ever stated publicly: ‘Nobody has evidence when they file a lawsuit’? Have you stated those words publicly?”
Lerach turned red again. “I made that statement.”
The time had arrived to further impeach Lerach with his own words. “Have you ever used the term ‘little fucker’ in connection with Dan Fischel?”
“I may have,” Lerach answered, explaining that at one point profanity was used in describing most if not all the defendants in the Lincoln case. Asked if he referred to Fischel directly and specifically, if he had said, “I want to put that little fucker out of business,” Lerach denied doing so with an emphatic “No.”
Lerach had spent enough time in court to know how this was playing with the jury. His personality was on trial, rather than Dan Fischel’s cold-hearted theories of “economic law”—and yes, it was clear even to himself that his personality had some rough edges. He had meant what he said in the witness stand. You had to be tough sometimes in the law. When did that become a crime—when did throwing the f-word around become a tort?
Later that night, after dejectedly walking the few blocks from the federal district courthouse on Dearborn Street to the Intercontinental Hotel on Michigan Avenue in a cold rain, and after a few drinks in the bar, he went to his room and called his wife.
“Star, we are getting killed,” he said, adding that “the old-boy Chicago Law School network has the fix in. I’m being humiliated.” Then he said something
out of character, with a crack in his voice. “It’s really depressing. I can’t stand this alone. I’m in a state of collapse. I need you to come.” She’d come as soon as she could, she assured him. Lerach soon wished he had not made the call. Although he didn’t know it, the worst part of the Lexecon trial was still ahead.
ON WEDNESDAY AFTERNOON, March 31, Hansen resumed his offensive. He held a powerful weapon. It was a document that Lexecon had submitted to the law firm of Sidley & Austin, which had worked as counsel to Charles Keating in his sparring with the Federal Home Loan Bank Board. Again, Lerach was the object of Hansen’s attack.
“Mr. Lerach, you didn’t tell this jury, did you, that among the documents in your document depository was a letter that was submitted as a cover letter to this report to the same federal regulators who you allege were misled by Lexecon in which the letter disclosed fully that Lexecon was writing the report and submitting it on behalf of Lincoln Savings and Loan? Exhibit 100 is before you, Mr. Lerach. Take a moment to look at it.”
While he did so, Hansen stood back and watched the witness redden once again. That morning Lerach had testified that Lexecon had hidden from the federal regulators the fact that it was working for Lincoln when it submitted its report. Here was a cover letter from Lexecon disclosing that it was submitting the report as an advocate for Lincoln.
“This is the letter that accompanied the report to the FHLBB, correct?” Hansen asked the witness.
“I don’t know,” Lerach answered. “I haven’t seen the memo until today.”
Hansen was not deterred. “It’s a document that was produced at your depository, wasn’t it, Mr. Lerach?”
“I don’t know that,” Lerach replied. “I haven’t seen it.”
Hansen directed him to look at production code numbers at the bottom of the document and identify whether the document was, in fact, stamped with a Milberg Weiss depository code.
Circle of Greed Page 33
